No, WeWork is not a threat to NYC tech

The headline in Crain’s was certainly alarming. "Woe is We: Revaluation Threatens IPO market, city’s tech economy." Analyzing the news that investor interest in WeWork was so poor that the company was considering slashing its valuation in half, my colleague Aaron Elstein wrote, "Things could get ugly if venture capital firms can’t sell these fledgling companies to the public ... If investors conclude there is no big payoff, the stream of money that has driven New York’s tech economy since the financial crisis will dry up quickly."

I beg to differ.

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We, as the company is formally called, is not like the vast majority of New York tech companies. Like Uber and a handful of other high-profile operations, it has benefited from a virtually unlimited availability of venture capital. This has led to profligate spending that is very unusual among the scores of tech companies in New York whose executives I have interviewed.

Its business model of leasing space long-term and renting it out short-term has always been risky in an economic downturn. Its strategy for mitigating that risk—creating limited liability companies so it can simply walk away from its leases—is less viable now that landlords have caught on.

Finally, the conflicts of interest and eyebrow-raising provisions to give founder Adam Neumann control are unusual even for a tech company.

Meanwhile, venture capitalists continue to back scores of New York companies in a wide variety of industries with much more realistic goals. Several times a week I get the TechNY Daily newsletter, which tracks investments. Monday’s newsletter alone reported the following for companies in the city:

Even Financial raised $25 million in a strategic investment round; Kasisto obtained $15 million in a series B funding; Stylistics raised $15 million in a series B funding; Atoms raised $8.5 million in a series A funding; Fund That Flip garnered $11 million in a series A round; and Esau obtained $1.6 million in seed funding.

Every TechNY Daily newsletter is like that.

The obsession with WeWork is obscuring a more important test for New York tech. Peloton, expected to go public in the next month or so, is a classic New York tech company because it is targeted toward consumers with a way to disrupt an established business, in this case gyms and cycling studios. A friend of mine got a Peloton bike this month and she raves about how much time it has saved her now that she doesn’t have to go to the gym.

Peloton has built a serious business, with revenues of $915 million in the year ended in June, 1.4 million members and a loss of just $195 million. By the standards of recent IPOs, the red ink is not very much. We is on track to lose almost $2 billion this year with a $1 of losses for every $1 of revenue.

If Peloton is a success, it won’t matter if WeWork blows up. If Peloton can’t raise money in a public offering, then I’ll begin to worry.

Crain’s New York Business is the trusted voice of the New York business community—connecting businesses across the five boroughs by providing analysis and opinion on how to navigate New York’s complex business and political landscape.